Eligible military members are automatically enrolled in life insurance with premiums deducted from their paychecks. While this automatic policy offers some protection, it may not be enough for your family. It's important for military members to carefully consider life insurance options to ensure family members have the coverage they need if the unthinkable happens.
Here is what you should know about getting life insurance in the military, including circumstances and policy features you should consider.
Servicemembers' Group Life Insurance (SGLI)
Every service member who enters active duty or reserve status is covered automatically with the Servicemembers' Group Life Insurance (SGLI) with a death benefit of up to $400,000. Premiums of about $29 per month are automatically deducted from pay. Service members covered by SGLI are also covered with Traumatic Injury Protection for very little extra per month with a benefit of $25,000 to $100,000.
SGLI is available to active service members along with Ready Reservists, Coast Guard members, cadets and midshipmen of the military academies, and other qualified service members. Upon separation, service members with SGLI coverage can convert their coverage to a renewable term policy through the Veterans' Group Life Insurance program with coverage capped at $400,000.
Limitations of SGLI Coverage
SGLI is an important benefit available to service members. It offers low-cost life insurance coverage with a death benefit of up to $400,000 and is a type of life insurance with no medical exam necessary. You can also receive an additional $100,000 in Service Death Gratuity. All eligible service members can receive coverage, regardless of health. Still, SGLI has limitations. As with any group life insurance policy, you should not rely on it alone to protect your family.
While $400,000 to $500,000 may sound like a lot of money, it's unlikely to offer enough protection for a surviving spouse and children. Life insurance should provide a stream of income for your survivors to replace income you would have provided. With rising costs of college education, health care, and housing, this benefit may not go as far as you would like, especially if you will leave your family with a mortgage and other debt.
Coverage will also be terminated when you leave active duty. Like other group insurance plans, your coverage will terminate after you leave the military but you will receive free coverage for 120 days. While you have the option to convert your SGLI coverage to a term life insurance policy after separation, you can likely get a better value with a commercial life insurance policy if you are healthy. VGLI premiums can be too expensive for healthy people and the premiums increase every 5 years.
SGLI isn't enough to protect a young or growing family and the coverage will disappear when you leave the service, likely when you need it the most. If you are a non-tobacco user, you will likely pay much more than necessary by converting the policy to VGLI. Term life insurance for smokers is usually more costly.
How to Get Additional Life Insurance in the Military
If you are married, have children, or care for an aging family member, SGLI coverage is probably not enough to provide for your loved ones if something happens to you. It's a good idea to purchase an additional life insurance policy. You should also consider replacing VGLI coverage with an individual life insurance policy after leaving the military for the best rates.
Military members can have trouble getting life insurance coverage from just anywhere, however. Some military professions do not qualify for typical life insurance because insurers consider their jobs too risky. Typical life insurance policies also have what's known as a 'war clause' which means the policy will not pay a death benefit for someone who dies as a result of war.
As a military member, you will need to choose a life insurance company that understands the military and the unique risks military members face. When comparing life insurance options for military members, make sure your policy includes:
- Severe injury benefit. This coverage pays a benefit if you suffer a severe injury in the line of duty.
- Coverage for war-time death. A military-friendly policy will include coverage during times of war or an act of terrorism.
- SGLI replacement. Military-friendly life insurance policies may offer guaranteed SGLI replacement. This guarantees the replacement of some or all of your SGLI benefit that is lost if you retire or separate from the military, even if you become disabled.
- Spouse and child coverage. You can typically choose to buy coverage for yourself, your spouse, and children with the same enrollment form for lower combined premiums.
How Much Insurance Do You Need?
Calculating how much life insurance you will need can be difficult as everyone's needs vary and there is no single way to calculate your family's financial needs in the future. Get a free life insurance quote estimate to get a general idea of what you will be paying. You should consider the following to determine the amount of coverage you need to buy:
- College education. If you have children, consider factoring in the cost of their higher education when buying life insurance.
- Outstanding debt. Consider the amount of debt you will be leaving your family, including a mortgage, car loan, and student loans.
- Dependents. If children or other family members rely on you for financial support, you may need to increase the amount of life insurance you buy by several hundred thousand dollars.
- Financial safety net. You may also wish to leave your family enough money to provide a financial cushion that can be used for necessities like medical expenses or discretionary expenses like vacations or summer camps.
- Your age and health. As you get older, you will likely need less coverage as you should have fewer debts and dependents.